Answers

Which set of intellectual property regulations apply to my institution and me?

For Grants whose Notice of Grant Award is executed prior to December 17, 2009, the answer depends on whether or not the Grantee Institution is Non-Profit or For-Profit. Non-Profit institutions whose Notices of Grant Award are executed prior to that date are governed by CIRM regulations, sections 100300-100310. For-Profit institutions whose Notices of Grant Award are executed prior to that date are governed by sections 100400-100410.

All Grants with a Notice of Grant Award executed on or after December 17, 2009, are governed by sections 100600-100611 (regardless of the profit status of the Grantee). For Notice of Loan Awards executed after December 17, 2009, sections 100600-100611 (“Chapter 6”) apply EXCEPT Sections 100602(c)(3) and (5) and 100608 (Revenue Sharing).

Is there a threshold dollar amount below which CIRM’s IP regulations do not apply?

CIRM’s IP regulations are triggered upon the first CIRM dollar received. That said, certain provisions of the regulations only apply after given monetary thresholds or other conditions are satisfied. For instance, the revenue sharing obligations of Section 100608 begins only after the Grantee receives $500,000 in revenues from its licenses, after certain deductions.

Why does CIRM require Grantees and Loan Recipients to keep CIRM informed about intellectual property developments and to share revenues with the State of California?

Proposition 71 requires CIRM to balance the benefit of receiving revenues for the state of California from inventions made in whole or in part from CIRM funding with the need to ensure that essential research is not unreasonably hindered by CIRM regulations. The IP regulations strike that balance by ensuring that our Grantees own the intellectual property they create and allowing them to determine how best to exploit new technologies, while simultaneously ensuring that California taxpayers receive a fair return on their investment.

This balance is based on two important principles: 1) The greatest economic return to the state’s general fund and its citizens will result from the discovery of therapies and cures; and 2) The involvement of the private sector is an essential element in developing a therapy or cure.

To whom do CIRM’s regulations apply?

Obligations arise both directly and indirectly under CIRM’s regulations. For instance, access and pricing requirements, directly apply to Grantees, Collaborators and Exclusive Licensees. (See section 100607). Section 100604, which governs Publication-Related Biomedical Materials sharing, applies only to Grantees and Loan Recipients. On the other hand, in order to comply with CIRM’s regulations, Grantees (and Loan Recipients) must enter agreements compelling certain other identified entities to engage in specified conduct. CIRM also regulates other entities by virtue of the fact that a Grantee or Loan Recipient will not be able to comply with CIRM’s regulations unless it requires certain actions from others. For instance, section 100602(a) requires Grantees to enter into agreements with Collaborators and Grantee Personnel to ensure disclosure of CIRM Funded Inventions. In addition, all intellectual property regulations in Chapter 6 apply to Loan Recipients (see Section 100801) except for certain reporting obligations in Section 100602(c)(3) and (5) and the revenue sharing requirements set forth in section 100608. Finally, the regulations also require Grantees and Collaborators to ensure their Exclusive and Non-Exclusive Licensees maintain certain records and report certain types of information to the Grantee to ensure compliance with these regulations.

I will be partnering with other scientists from different institutions in my CIRM-Funded Research. Do CIRM’s regulations apply to their research that is conducted as part of the CIRM-Funded Research, as well?

As stated in Question 4, obligations arise both directly and indirectly under CIRM’s regulations. Regulations relating to access plans and pricing (100607) specifically apply to Grantees, Collaborators and Exclusive Licensees. Other regulations directly apply only to CIRM Grantees (100604); however, the Grantee will be required to enter into appropriate agreements with those whose cooperation is required for the Grantee to comply with its obligations. The applicability of CIRM’s regulations will depend on whether the scientist involved falls within the definition of a Collaborator, Grantee Personnel, an Exclusive or Non-Exclusive Licensee as defined in Section 100601.

The scientist will be considered a Collaborator if (s)he: 1) receives CIRM funding for work performed under a Grant or loan; and 2) obtains any ownership rights to a CIRM-Funded Invention or CIRM-Funded Technology during the Grant. If the scientist is a Collaborator the obligations set forth above in Question 4 will apply.

As stated in Question 4, if the partnering scientist licenses any CIRM Funded Technology of CIRM Funded Inventions after the close of the Grant, (s)he will have the obligations set forth above in Question 4, except the revenue sharing requirements of section 100608, which apply only to Grantees and Collaborators.

Do Collaborators and non-exclusive licensees have obligations to CIRM?

A Collaborator is subject to the revenue sharing and access requirements. Grantees must structure their licenses, collaboration agreements and all other arrangements for performing the funded work in a way that permits the Grantee to fulfill its obligations (including reporting obligations) to CIRM. In addition, our Grantees must structure their agreements with licensees to ensure that the Grantee will be able to fulfill its various obligations to CIRM (such as reporting). Non-Exclusive Licensees are not subject to revenue sharing (§ 100608) or access and pricing requirements (§ 100607).

What is meant by intellectual property agreements in Proposition 71?

Proposition 71 requires that the ICOC shall establish standards that require that all Grants and loan awards be subject to intellectual property agreements that balance the opportunity of the State of California to benefit from the patents, royalties, and licenses that result from basic research, therapy development, and clinical trials with the need to assure that essential medical research is not unreasonably hindered by the intellectual property agreements. Rather than enter into individual IP agreements, CIRM has enacted regulations to serve this purpose.

If an invention arises during the CIRM-Funded Research, do CIRM’s regulations attach to that invention?

The answer depends on when the invention was “conceived” and “reduced to practice.” Similar to Bayh-Dole though narrower, CIRM’s regulations attach to “CIRM-Funded Inventions.” That term is defined to reach inventions arising from CIRM-Funded Research that is either:

Reduced to practice by a Grantee, Grantee Personnel or Collaborator during the Grant; or

Conceived by the above individuals during the Grant and reduced to practice by these individuals during the Grant or within 12 months of the close of the Grant.

Who owns IP developed with CIRM Funding?

Answer: CIRM retains no ownership of CIRM-Funded Inventions or other related intellectual property. See Section 100605(a). Under U.S. law, generally, ownership of IP follows inventorship. So, unless the inventor enters a contractual or other arrangement to transfer or assign ownership, the inventor will own the invention.

Does CIRM require a Grantee to obtain prior CIRM approval of strategies to exploit CIRM-Funded Technology – whether by license, sale or other form of transfer?

Answer: No. While CIRM’s regulations require a Grantee to take reasonable steps to develop, commercialize or otherwise bring to practical application CIRM-Funded Technologies and Inventions, the regulations neither grant CIRM an ownership interest in these discoveries nor require CIRM approval of a Grantee’s decision whether or not to retain or transfer interest in these discoveries.

The Grantee controls patent prosecution, choice of counsel, selection of claims and all patent prosecution decisions.

Does CIRM discourage development of CIRM-Funded Technology through Non-Exclusive Licenses?

A: No. In fact, CIRM encourages broad sharing of CIRM-Funded Research. In the context of licensing arrangements, CIRM encourages development by Grantees via Non-Exclusive Licenses. CIRM believes Non-Exclusive Licenses have the greatest potential in many cases to further develop the scientific field and ensure the broadest benefit across all disease-related research.

If a Grantee elects not to self-develop the fruits of its CIRM-Funded Research and instead determines licensing the technology is the best path forward, the Grantee must make commercially reasonable efforts to negotiate Non-Exclusive Licenses, unless it would put a Grantee at a disadvantage with a competitor or if necessary to provide economic incentive to commercialize invention. (Section 100606(b).)

Do I need to obtain CIRM approval of a license of a CIRM-Funded Invention before execution?

Answer: No. Licensing activities are controlled by CIRM Grantees. The CIRM Grantee is free to identify potential licensees, establish the scope and terms of those licenses, and determine and execute the overall strategy for exploitation of those discoveries as it sees fit. CIRM requires Grantees to report these licensing activities to CIRM so that CIRM is able to monitor the progression of CIRM-funded research and ensure research does not stagnate. Specifically, section 100602, subdivision (c)(4), states “A Grantee must report to CIRM the execution of all Exclusive License Agreements, Non-Exclusive License Agreements, Material Transfer Agreements or Collaborative Agreements conveying rights in CIRM-Funded Inventions or CIRM-Funded Technology.”

Grantees who elect to enter Exclusive Licenses for a CIRM-Funded Invention or CIRM-Funded Technology are required under Section 100606(c)(1) to “document the development and commercialization capabilities” of the intended licensee before entering the arrangement. Does this prohibit Grantees from extending such licenses to start up companies and other entities which may not have fully developed capabilities at the time the contract is signed?

Answer: No. The IP regulations do not prohibit Grantees from entering Exclusive Licenses with start up companies or other entities that lack well established development and commercialization capabilities at the time the license is entered. However, a Grantee must document the development and commercialization capabilities of any intended exclusive licensee prior to entering into an Exclusive License and must monitor the licensee’s compliance and progress with the development plan.

Who has an obligation to share revenues from CIRM-Funded Inventions and CIRM-Funded Technologies with the State?

How do I calculate the potential financial obligations I will have to the State if I develop a CIRM-Funded Technology or CIRM-Funded Invention?

Answer: One must first consider the following: Is the Grantee or Collaborator licensing the CIRM-funded Invention or CIRM-Funded Technology, or is it self-commercializing it?

If the Grantee or Collaborator licenses its CIRM-Funded Invention or CIRM-Funded Technology, then the Grantee has an obligation to share revenue a specified portion of resulting Licensing Revenue with the State. See Section 100608(a). This obligation applies to Licensing Revenue received by the Grantee from both Exclusive and Non-Exclusive Licenses. Note, however, that the regulations require sharing only of a certain percentage of the Grantee’s Licensing Revenues – not the licensee’s. (Details and examples are provided below).

If the Grantee self-commercializes the CIRM-funded invention or technology, then the Grantee owes an amount that is calculated based upon the amount of the original Grant and success of the product. See Section 100608(b).

Does a licensee – exclusive or non-exclusive – have to abide by the revenue sharing obligations?

Answer: No. The revenue sharing provisions contemplate only two scenarios: either a Grantee or Collaborator licenses the CIRM-Funded Technology to a third party, or the Grantee or Collaborator self-commercializes the technology. Licensees – regardless of whether they are exclusive or non-exclusive – do not bear any revenue sharing obligations with the state.

Are the license revenue sharing provisions applicable to a Grantee or Collaborator proportional to CIRM’s investment in an invention?

Answer: Yes.

Where a Grantee or Collaborator elects to license a CIRM-Funded Invention (instead of self-commercializing), it must share 25% of the Grantee’s revenue from the license.

Proportionality: Where funding sources additional to CIRM directly contributed to the development of the invention or technology, then the return to the State is reduced, making it proportional to CIRM’s participation. See Section 100608(a)(2).

Finally, revenue sharing is not triggered until after $500,000 in revenues (a trigger that is adjusted for inflation).

Example #1: Grantee accepts CIRM Grant and patents a discovery resulting from the CIRM-Funded Research. No funds from other sources were used in the development of the patented invention. Grantee licenses the invention to a third party and receives 1 million dollars in licensing revenue the first year.

Result: CIRM receives 25% of the Grantee’s share in excess of $500,000 = $125,000, regardless of whether the license was an Exclusive or Non-Exclusive License

Example #2: Same scenario above, but CIRM’s funding represents 1/10th of the total funding the Grantee used to develop the invention.

Result: The state receives 1/10th of the 25% of the licensing revenue, or $12,500.

Does further Grant funding from another source count as “Licensing Revenue” which the Grantee must revenue share with the State?

Who determines what the proportional contribution is?

Answer: The Grantee is required to include its annual Invention Utilization Report to CIRM information about additional sources and amounts of invention related funding. The Agency has the right to audit this submission.

What gets counted in determining the proportionality of CIRM’s contribution?

Answer: Grantees report to CIRM the total funding from all sources that directly contributed to a CIRM-Funded Invention. This information includes the funder’s identity, the dollar amounts each contributed and the dates of contribution.

How should CIRM Grantees and Collaborators calculate the financial obligation to the state in the event they self-commercialize an invention?

Answer: The revenue sharing obligations that arise in the case of commercialization by a Grantee or Collaborator are set forth in Section 100608(b). In such cases the revenue sharing obligation is capped based on CIRM’s contribution and the annual revenues derived from commercialization of the CIRM-Funded Research, Invention or Technology by the Grantee/Collaborator. Thus, where such revenues do not exceed $250 million in any year, the State is owed a multiple of three times the amount of the CIRM Grant. This payment is made at a rate of 3% of annual revenues. The first time revenues exceed $250 million, but less than $500 million, the State is owed another one-time payment of three times the Grant amount. Finally, the first time revenues exceed $500 million in a year, the State is owed a final payment of three times the Grant amount. At this juncture, if a CIRM-Funded Invention or Technology is involved in achievement of said revenues and the CIRM funding exceeds $5 million, then an additional 1% royalty will apply for a specified period of time.

Revenue Sharing – Self-Commercialization Examples

a) When revenues exceed $500,000 (adjusted for inflation) in a year for a self-commercialized product, then the Grantee/Collaborator pays 3 times the total Grant at a rate of 3% of annual revenue attributable to the CIRM-Funded product.

Example 1: Grantee with $1 million Grant commercializes Drug that earns $400,000 in year one.
Return to the state due in Year one: $0.

Example 2: Same as above: Drug earns $10,000,000 in year two.
Return to the state due in Year two: $3 million in total which is paid at a rate of 3% of annual revenues, thus is year 2 the payment is $300,000.

b) Revenue Sharing – Self-Commercialization - Blockbuster

In addition to any payments described above, a one time payment in the amount of 3x total CIRM Grant amount is due at each of the following triggers:

When annual revenues exceed $250,000,000; and

When annual revenues exceed $500,000,000.

Example: Prior scenario, but Grantee receives $300 million in third year.
Return to the State: In addition to the earlier payments, an additional $3 million now due.

c) To illustrate what the actual payments will look like on a year-by-year basis, consider the following:

Year 4: $125m balance due = $2.1m. (3% of $125m is $3.75m, but the return to the State is capped at 3x the grant amount ($1m) for this first trigger. Because of prior payments, the amount due this year is capped at the remaining $2.1m.)

In the event a CIRM-Funded Invention is involved and the revenue exceeds $500,000,000 in any year, then an additional 1% royalty due on amounts over $500,000,000 where CIRM funding exceeds $5 million.

Example: Same scenario above, but a CIRM-Funded Invention and CIRM-Funded Technology are involved in Grantee achieving Net Commercial Revenue of $600 million in year four from product sales that arises in whole or in part from a CIRM-funded invention

Result: CIRM receives additional $3 million, but no royalty because the Grant is less than $5 million.

What is an “access plan” and when is one required?

Answer: Grantees, Collaborators and their Exclusive Licensees must submit a plan to afford uninsured Californians access to a Drug that is developed in whole or in part with CIRM funds. CIRM envisions that such a plan will be similar to “patient assistance plans” already prevalent in the pharmaceutical industry. The plan must be provided to CIRM a minimum of 90 days prior to commercialization of the Drug in California (unless CIRM agrees otherwise). The plan is subject to approval by CIRM after a public hearing providing for receipt of public comment. This obligation does not apply to non-exclusive licensees.

Does CIRM prescribe what the elements of the plan must be?

Answer: No. The regulation requires that the plan be “consistent with industry standards” at the time of commercialization. Plans may account for the size of the market and the resources of the Grantee/Collaborator/Exclusive Licensee. In addition, the Grantee/Collaborator/Exclusive Licensee is not responsible for any costs of administering the Drug nor for any associate costs of medical procedures or protocols for the Drug therapy, nor for any costs for attendant care.

Do CIRM’s regulations seek to ensure Californians pay a fair price for drugs they helped create?

Answer: Yes. Grantees, Collaborators and Exclusive Licensees, and their successors and assigns, must participate in the CalRx program and provide a Drug, the development of which was in whole or in part the result of CIRM-Funded Research, to those eligible at the CalRx prices. Grantees/Collaborators/Exclusive Licensees must also provide Drugs to publicly-funded purchasers at one of the benchmarks described in CalRx. The benchmarks are:

Eighty-five percent of the average manufacturer price for a drug, as published by the Centers for Medicare and Medicaid Services.

The lowest price provided to any nonpublic entity in the state by a manufacturer to the extent that the Medicaid best price exists under federal law.

The Medicaid best price, to the extent that this price exists under Federal law.

Do the pricing requirements above apply in all circumstances?

Answer: No. The pricing requirements above apply only if the product is self-commercialized by the Grantee/Collaborator or Exclusive Licensee, and their successors and assigns. Also, the pricing requirements do not apply to products sold outside of California and only apply to certain Californians who are uninsured or underinsured.

Does a Non-Exclusive Licensee have to abide by the access and pricing provisions of section 100607?

Answer: No. The access and pricing provisions of section 100607 apply only to Grantees, Collaborators and Exclusive Licensees (and their successors and assigns). See above for further discussion of the important elements of the access and pricing provisions.

If I wish to publicize the results of CIRM-Funded Research, do I have obligations to CIRM regarding the content or timing of those publications?

Answer: CIRM imposes no restrictions on the publishing schedule of research results or its contents. That said, in the event there is publication in a scientific journal or an abstract in connection with a meeting, (regardless if by Grantee, a Collaborator etc) of a CIRM-Funded Invention or CIRM-Funded Technology, within 60 calendar days of such publication, Grantee must provide CIRM with an abstract (approximately 500 words) submitted on a Publication Disclosure Form along with a brief statement of the Principal Investigator’s biographical credentials. In addition, such articles must acknowledge CIRM funding. Finally, Grantees must provide notice in advance of press releases discussing CIRM-Funded Research. This requirement does not extend to third parties that are not funded by CIRM.

A Grantee must ensure that the final abstract or manuscript includes the URL of a website where a Materials Transfer Agreement (or similar document) can be accessed to facilitate requests for these materials.

Is a Grantee required to publish?

Answer: The IP regulations do not contain an explicit publication requirement. The Agency respects the ability of Grantees to determine what and when to publish. Nonetheless, sharing useful scientific advances is helpful to advance the field of stem cell and regenerative medicine research and CIRM’s mission. Hence, Section 100606(a) requires Grantees to make “reasonable efforts” to bring CIRM-Funded Inventions and CIRM-Funded Technology to practical application. Publication is one possible and reasonable means of making such inventions and technologies publicly available (see Section 100606(b)) and thereby discharging the obligation to negotiate Non-Exclusive Licenses for third party development of the invention or technology.

What is required of a researcher when the results of CIRM-Funded Research are published?

Answer: In addition to the notification and acknowledgment requirements described above, in certain circumstances a Grantee will be required to share materials with other California researchers. This requirement embodies a condition often found in scientific journals.

When a Grantee publishes a scientific paper describing tangible research material of biomedical relevance first produced in CIRM-funded research, such materials must be shared for research purposes for free or at actual cost (exclusive of costs for overhead, research, discovery or other non-direct costs of providing the materials) to a requestor in California within 60 days. The requirement applies where the publication occurs in a Scientific Journal or in connection with a scientific meeting.

With prior approval from CIRM, a Grantee’s obligations to share materials may cease when the materials are made broadly commercially available. In addition, CIRM may provide alternatives to this requirement upon satisfaction of certain conditions. Finally, in lieu of this requirement, a Grantee may provide requestors with the information necessary to reconstruct or obtain identical material. (see Q33)

I am in the business of selling iPS screening tools. If the research material I publish is such a screening tool, am I compelled to give away for free the material even though this would drastically undermine my business?

Answer: No. The regulations are not intended to require a business to give away all of its product for free. Instead, and with prior approval from CIRM, a Grantee’s obligations to share materials cease when the materials are made broadly commercially available.

Are there ways to address alternatives to the sharing requirement that meet CIRM’s goal of encouraging access to CIRM-Funded Research?

Answer: Yes. CIRM may approve alternatives if:

The financial burden becomes onerous;

The material or its transfer could pose a public health risk;

The request is otherwise inappropriate, as determined by the CIRM.

In addition, in lieu of sharing, Grantee may provide requestor with the information necessary to reconstruct or obtain the material.

With CIRM’s prior approval, the obligations to share cease when the materials are broadly commercially available.

Finally, there is no obligation to share third party materials described in publications such as raw materials use to develop the published biomedical material, or materials covered by third party IP rights.

My Grant began before the consolidated regulations (100600 series) became effective and is governed by the 100300 series. How will CIRM apply the term “broadly commercially available” in 100304?

Answer: As you are aware, subsequent to adoption of the 100300 series of regulations that governs your Grant, CIRM consolidated its two sets of regulations (the –300 series applicable to non-profit Grantees and the –400 series applicable to for-profit Grantees). In doing so, CIRM’s oversight board, the Independent Citizens Oversight Committee, had the opportunity to further develop its policy regarding materials sharing and the circumstances under which relief will be Granted by CIRM. While your Grant remains governed by the –300 series and not the consolidated regulations, CIRM’s interpretation of section 100304 will be informed and guided by the policy elements contained in section 100604, which to reiterate, embody the ICOC’s most recent consideration of the circumstances in which relief will be Granted.

Does the sharing requirement apply to all materials developed as a result of CIRM-Funded Research?

Answer: No. The term “Publication-Related Biomedical Materials” is defined in Section 100601, subdivision (dd). Among other qualifications, only materials first produced in the course of CIRM-funded research and described in a published scientific paper come within the scope of the sharing requirement.

Are there circumstances where CIRM will force a Grantee to share CIRM-funded intellectual property?

Answer: In rare circumstances, yes. Like the federal government, upon the satisfaction of certain conditions (including failure of the Grantee/Collaborator/Exclusive Licensee to cure) CIRM may intercede in certain circumstances on behalf of the State and Grant exclusive or nonexclusive licenses if the Grantee/exclusive licensee:

Fails to make reasonable efforts to achieve practical application of the invention or research data;

Fails to comply with the access plan;

Fails to use the data or invention to address a public health emergency declared by the Governor.

What if there is disagreement between the Grantee and CIRM over the exercise of march-in rights?

Answer: Prior to exercising march-in under the very limited circumstances above, Grantees will be notified of CIRM’s intentions and will have at least one year to comply before exercise of march-in, except for health emergencies. If after this period the parties remain in dispute, the Grantee may appeal to the ICOC.

What happens in the event a Grantee merges with or is acquired by another entity?

Grantees are required under Section 100602(c)(3) to report information concerning funding received from non-CIRM sources that directly contributed to a CIRM-Funded Invention. Why is this information needed and what is meant by the “dates of contribution”?

Answer: The amount of Licensing Revenue which a Grantee must share with the State of California under Section 100608(a)(1) is decreased in circumstances where funding sources other than CIRM directly contributed to the development of the CIRM-Funded Invention or CIRM-Funded Technology. This can include funding from the federal government. To verify that the revenue sharing has been properly calculated, Section 100602(c)(3) seeks information about other funding sources.

The timing or dates of contribution from those other sources helps verify that the additional funding directly contributed to development of the Invention or Technology. Grantees can report the date on which they first received the additional funding or the dates of specific draw downs, at their discretion.

How far does the requirement in Section 100602(c)(1) to report patent applications which “claim, or cite to publications concerning” CIRM-Funded Inventions extend?

Answer: Grantees must cite in their Invention Utilization Reports patent applications filed by the Grantee, Grantee Personnel and/or Collaborators which claim, or specifically cite publications concerning, a Invention resulting from the subject Grant. Grantees are not required to report references by third parties to their Invention.